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Tax Changes to Short-term Rentals Effective on January 1, 2024

Jan 3, 2024 | News

It is important to take note that the tax changes in respect to non-compliant short-term rentals proposed in the 2023 Fall Economic Statement will take effect on January 1, 2024.

In an attempt to increase the pool of housing available for long term residential rental and reduce the number of properties listed on online short-term rental platforms such as AirBnB and VRBO, the federal government announced that it will deny income tax deductions for expenses incurred, including interest expense, to earn short-term rental income in provinces and municipalities that have prohibited short-term rentals.

Furthermore, these measures would also be extended to short-term rental operators which are not in compliance with local applicable law and requirements.  For example, in Toronto, only properties which qualify as a primary residence where an approved license is obtained from the City are eligible to be used for short-term rental (for more details on Toronto short-term rentals, visit

Given that the short-term rental requirements and regulations differ from city to city, it is crucial to review and ensure that you are in compliance with each city’s short-term rental requirements so that current income tax deductions may be claimed against any short-term rental revenue earned.

The above may incentivize non-compliant short-term rental operators to convert their properties into long-term rentals.  However, it is critical to note that if a property which was previously used to earn short-term rental income is converted to a property used for long-term rental (for rental of periods of one month or more), the change in use of the property is deemed to be a “substantial renovation” for GST/HST purposes which creates an obligation for the owner to self-assess and remit GST/HST on the fair market value of the property at the point in time when the property is first rented for long-term rental which is a very punitive tax consequence.

Given the above, it is crucial to ensure that you are onside with all provincial and municipal regulations to ensure that you are not affected by the new rules which are punitive.  If you have any questions in respect to the above, contact your TZR advisor as soon as possible.

The above content is for informational purposes only and is general in nature.  It is not intended to be advice.  No person or entity should act upon the information above without receiving professional advice after all the facts and circumstances specific to their situation are thoroughly reviewed.